Light Reading
Comcast is ponying up $45.2 billion for Time Warner Cable for much more than TWC's 11 million or so video customers.

Comcast-TWC Deal: Playing All the Numbers

Alan Breznick
2/14/2014
50%
50%

Unlike the big cable mergers of the past, Comcast is buying Time Warner Cable for more than TWC's cache of video subscribers. A lot more.

Although much of the early coverage of the proposed $45.2 billion deal has focused on the 11.2 million video subscribers that Time Warner Cable Inc. (NYSE: TWC) would add to Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s already market-leading stash of 21.7 million basic cable customers, that's far from the whole story.

That's because the North American cable business is now about non-video services at least as much, if not more than, it's about the traditional video services. (See Comcast's TWC Coup: 3 Things to Know.)

So let's play the numbers game here by looking at some other key numbers driving this deal, not just the usual video numbers. Then it will become clear just how dominant a force the planned Comcast-TWC combo could be.

Broadband subscribers
With an impressive total of 20.7 million high-speed data customers today, Comcast already leads the US cable broadband market by a wide margin. In fact, like most major North American MSOs, it now has nearly as many broadband customers as video customers. Throw in TW Cable's 11.1 million broadband subscribers and you've got a grand total of nearly 32 million high-speed data users, nearly as many as the 33 million video customers that the new company would inherit.

While Comcast executives have solemnly vowed to sell off 3 million video customers to cap the combined company's size at 30 million (or 30% of the US pay-TV homes) to ease federal antitrust concerns, they've said nothing about divesting any broadband subscribers. That's even though the combined company would control close to 40% of the US cable broadband market, well above the MSO's self-imposed 30% limit on the video end.

To be sure, most cable video subscribers are also cable broadband subscribers these days and vice versa. So it would be tough to divest one without the other. But, even if it sold off 3 million broadband homes, Comcast would still have a commanding broadband presence nationally.

Voice subscribers
Voice services don't get much attention (or respect) for cable operators anymore for some reason. But they are still huge, growing revenue generators for the industry, trailing only video and broadband. So they count for a lot in this deal as well.

With nearly 10 million VoIP customers, Comcast is already the fourth-biggest wireline phone company in the US. Toss in TW Cable's 4.8 million phone customers and you're talking about a total of almost 15 million subscribers, which is a formidable total.

Major metro markets
Similarly, Comcast already boasts cable operations in 20 of the 25 biggest metro areas across the US, including nearly every major market on the East Coast and many of those on the West Coast. But the two big markets that it doesn't dominate right now are the two largest in the country -- New York City and Los Angeles. Guess which ones TWC controls?

Besides the nation's two biggest cities, TW Cable would also bring Columbus, Cincinnati, Cleveland, Charlotte, Kansas City, Dallas, San Antonio, and part of San Diego into the Comcast fold, at least before the planned divestiture. So, with just a handful of exceptions like St. Louis (Charter Communications Inc. , New Orleans (Cox Communications Inc. ), and Tampa (Bright House Networks ), every NFL city would be a Comcast city.

The Proposed Comcast-TWC Goliath
If consummated, the proposed Comcast buyout of TWC would give the combined company control over huge swaths of the US, especially east of the Mississippi. This map from Mosaik shows the Comcast cable systems in red and the TWC systems in blue.
If consummated, the proposed Comcast buyout of TWC would give the combined company control over huge swaths of the US, especially east of the Mississippi. This map from Mosaik shows the Comcast cable systems in red and the TWC systems in blue.

Business services revenues
Here's the pièce de résistance for Comcast in this deal. With business (enterprise/wholesale) services now the fourth-biggest revenue generator for major US MSOs, Comcast has become king of this category during the past three years. The MSO racked up a total of $3.2 billion in business revenues last year, up more than 26% from nearly $2.6 billion in 2012. (See Comcast Makes Middle Market Gains.)

TWC has been no slouch in this area either, though. It took in $2.3 billion in 2013, up 21% from nearly $1.9 billion the year before. So the combined company would instantly generate $5.5 billion in business services revenues, at least before divestiture. (See TWC: Charter's Got Nothing on Us.)

Even more importantly, perhaps, TWC would grant Comcast access to the New York City and Los Angeles commercial markets, the two biggest in the country. With control of those two markets and a true national presence for the first time, the combined company could not only sign up more small and midsize firms in those markets, but break into the large enterprise sector as well. That prospect should have AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) somewhat concerned.

Indeed, on the joint Comcast-TWC conference call with the press Thursday morning, Comcast Chairman and CEO Brian Roberts made a note of the enhanced competitive capabilities of the merged firm. He said the new Comcast would be better able to compete with other national and international companies for larger customers.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

(14)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Page 1 / 2   >   >>
swattz101
50%
50%
swattz101,
User Rank: Light Beer
2/20/2014 | 12:01:09 PM
Re: M&A
I believe Comcast does have some small pockets in Arizona, but Cox is the big providor, at least in Tucson and Phoenix. I found this map, I don't know how acurate and probably a little dated, but gives a picture of some of the coverage areas out there.

http://tvbythenumbers.zap2it.com/2011/01/12/picture-1000-words-us-cable-provider-map/78308/
KBode
50%
50%
KBode,
User Rank: Light Sabre
2/19/2014 | 9:23:53 AM
Re: New York
It might be, true. I'm not entirely sure the plan all along wasn't to sell the second Glenn Britt left. DOCSIS 3.0 upgrades don't cost all that much, and you would think it would be something the company would want to invest in. But here we are in 2014 and only Los Angeles, NY and Kansas City (because of Google Fiber) are seeing any attention.

I do think the deal will pass. While I think the concerns about scale, leverage and dominance have merit (especially the use of content licensing deals and usage caps to hinder Internet video), it will be hard to prove them cleanly enough to be effective. I also bet Comcast has some theatrical conditions ready to go to make the deal sound more compelling than it is.
MarkC73
50%
50%
MarkC73,
User Rank: Light Sabre
2/19/2014 | 1:53:16 AM
Re: M&A
Ok, well its a little hard to read the fine print, it says something about DOCSIS serving areas, but I'm almost 100% sure they serve Hawaii and the coverage is most of the state, I also thought they were also in Arizona and Colorado but I'm less sure about what types of services and how much of coverage thoses states get.  Same with Kansas, I know they are in Kansas City (which is not in Kansas) which is shown.

It's a minor detail, since in the end they are targeting about 30% which means they'll need to divest some of their current areas.  The big question is which ones and to who?
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/18/2014 | 9:48:15 PM
Re: M&A
Tell us more about what's missing in the map, Mark. What did you spot?
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/18/2014 | 9:45:56 PM
Re: New York
Yep. Sounds about right. I wonder if New Yorkers will get any better service from Comcast, tho. The diference might be so marginal as to go unnoticed. It's still sad to see how much TWC has gone downhill. 
MarkC73
50%
50%
MarkC73,
User Rank: Light Sabre
2/17/2014 | 3:01:17 AM
Re: M&A
Yup, Cable Co's don't compete directly with each other, so I'm sure that will come up in the DoJ and FCC debates.  However, I am interested to see what areas get given up and to whom.  In my view, Comcast is a much more agile competitor.  But TWC and Comcast already had a joint tech doc for moving forward with IP services so maybe it really doesn't matter anyway.

That graphic is off.  It's missing at least one TWC area.  Or is that the proposed company and the rest will be sold off?
MikeP688
50%
50%
MikeP688,
User Rank: Light Sabre
2/15/2014 | 7:56:07 PM
Re: New York & Other Brief Thoughts
It is a bold move by Comcast--no question.     The smaller players (Cox/Charter et. al) will have their work cut out for them in terms of trying to stay relevant.   Another affirmation of what Alan noted is reflected in this chart from our friends @ Business Insider.  I did almost fell out of my chair in laughter at the claims by the folks @ Comast.   Beyond this , though,   I would humbly suggest though that the other part of the puzzle is control of content as Comcast continues to make inroads with its' ownership of NBC Universal.     Beyond the reach as discussed in the discourse here, it is content that matters--and I suggest that ultimately it is content that is crucial.    It is by no means certain that regulators will approve this right now....

May we truly live in interesting times. :-)

 

 
KBode
50%
50%
KBode,
User Rank: Light Sabre
2/14/2014 | 7:24:07 PM
Re: New York
Time Warner Cable always took a "targeted" approach to DOCSIS 3.0 upgrades, whereas Comcast simply decided to get out ahead of the demand, largely because Comcast saw more FiOS competition in many markets. Comcast at least invests something back into the market. Time Warner Cable tells YOU what you want and if it doesn't meet their beliefs, too bad. Time Warner Cable is also behind Comcast in terms of set top boxes, GUIs, and feature set.

Both perform horribly in customer satisfaction rankings, but I do think Comcast is the better of two "evils." 
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/14/2014 | 6:07:50 PM
Re: New York
So how much better do you think Comcast can do in NYC than TWC? How badly has Time Warner underperformed there?
albreznick
50%
50%
albreznick,
User Rank: Blogger
2/14/2014 | 6:05:59 PM
Re: Running the numbers
Interesting idea. So, if I understand correctly what you're suggesting, you're looking for the cost of the deal broken down by those various metrics?  
Page 1 / 2   >   >>
Educational Resources
sponsor supplied content
Educational Resources Archive
More Blogs from Breznick Unbound
As expected, US cable broadband subscribers pass cable video subs for the first time in latest report from Leichtman Research Group.
While the No. 2 US MSO is accelerating plans for all-digital video and broadband speed upgrades, it's still desperately playing catch-up.
In yet another attempt to conquer the TV set, Google is launching its Android TV operating system for the big video screen. But will it succeed where other attempts have failed?
In the latest edition of its Visual Networking Index (VNI) study, Cisco forecasts that HD and Ultra HD video will account for nearly two-thirds of all IP video traffic by 2018.
Seven new cable products take the stage this year, covering a wide range of the technology spectrum.
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Documentaries
The Rise of Virtual CPE

1|27|15   |   01:38   |   (3) comments


As NFV strategies evolve from tests and trials to production telco networks, expect to hear a lot about virtual CPE (customer premises equipment) rollouts during 2015.
LRTV Documentaries
Optical Is Hot in 2015

1|23|15   |   01:56   |   (2) comments


Optical comms technology underpins the whole communications sector and there are some really hot trends set for 2015.
LRTV Custom TV
Policy Control in the Fast Lane

1|22|15   |   2:57   |   (0) comments


What's making policy control strategic in 2015 and beyond? Amdocs talks with Heavy Reading's Graham Finnie about the key factors driving change in the data services landscape. Find out what his policy management research reveals about the road ahead for policy control – and sign up for
LRTV Documentaries
Highlights From the 2020 Vision Executive Summit

1|21|15   |   4:33   |   (2) comments


In December 2014, Light Reading brought together telecom executives in Reykjavik, Iceland to discuss their vision for high-capacity networks through the end of the decade. The intimate, interactive meeting was set against the backdrop of Iceland's spectacular natural beauty. As one of the event's founding sponsors, Cisco's Doug Webster shared his company's ...
LRTV Huawei Video Resource Center
Huawei Pay-TV Partner Harmonic, Helping Carriers Accelerate 4K Video Deployment with Huawei

1|20|15   |   5:42   |   (1) comment


At IBC, Peter Alexander, Senior Vice President & CMO at Harmonic, speaks about the growing interest in pay-TV service and its branching into multiple devices.
LRTV Huawei Video Resource Center
Sony Marketing Director Olivier Bovis Discusses the Outlook for 4K and Cooperation With Huawei at IBC 2014

1|20|15   |   6:50   |   (0) comments


At IBC, Olivier Bovis, Marketing Director of Sony, speaks about the coming of the 4K era.
LRTV Huawei Video Resource Center
Huawei Pay-TV Partner Envivio, Helping Carriers Accelerate 4K Video Deployment

1|20|15   |   2:57   |   (0) comments


At IBC, Olivier Bovis, Marketing Director of Sony, speaks about the coming of the 4K era.
LRTV Huawei Video Resource Center
Pay-TV's Networked Future

1|20|15   |   6:29   |   (0) comments


At IBC, Jeff Heynen, Principal Analyst at Infonetics, speaks about the future of the pay-TV industry and its transition.
LRTV Huawei Video Resource Center
Jeff Heynen: Distributed Access Will Help MSOs Compete in the Future

1|20|15   |   2:26   |   (0) comments


At IBC, Jeff Heynen, Principal Analyst at Infonetics, speaks about moving to distributed access and the future trend of cable business.
LRTV Interviews
Cisco Talks Transformation

1|20|15   |   13:02   |   (0) comments


In December 2014, Steve Saunders sat down with Cisco VP of Products & Solutions Marketing Doug Webster at Light Reading's 2020 Vision executive summit in Reykjavik, Iceland. They spoke about Cisco's approach to network virtualization as well as how service providers can begin to monetize high-capacity networks through the end of the decade.
LRTV Interviews
Bob Wilson, Arsenal Legend: The Light Reading Interview

1|16|15   |   35:36   |   (3) comments


Arsenal goalkeeping legend Bob Wilson was Light Reading's guest interviewee at the 2020 Vision Executive Summit in December. See what the former soccer star and sports broadcaster had to say when he took to the stage in Iceland.
LRTV Custom TV
What MEF Third Network Initiative Means for SDN & NFV

1|14|15   |   6:13   |   (0) comments


Vitesse Semiconductor CTO Martin Nuss discusses the importance of the MEF Third Network initiative and why it's good news for SDN/NFV industry initiatives.
Upcoming Live Events
February 5, 2015, Washington, DC
February 19, 2015, The Fairmont San Jose, San Jose, CA
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
September 9-10, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
December 1, 2015, The Westin Times Square, New York City
December 2-3, 2015, The Westin Times Square, New York City
Infographics
Hot Topics
Google Continues Gigabit Expansion
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 1/27/2015
BlackBerry Wants Net Neutrality Protection – That's Just Sad
Mitch Wagner, West Coast Bureau Chief, Light Reading, 1/22/2015
Verizon Ready for Google MVNO Challenge
Dan Jones, Mobile Editor, 1/22/2015
FiOS Picks Up Pace Again
Alan Breznick, Cable/Video Practice Leader, 1/22/2015
Indiana Carrier Takes Fiber to the Farm
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 1/22/2015
Like Us on Facebook
Twitter Feed
Webinar Archive